Management Issues Become Political Fuel

ByDavid R. FrancisMarch 27, 1996

FOR the first time in many decades, management practices have become a political issue at the presidential level.

President Roosevelt fought with giant companies during the Great Depression. President Kennedy got into hot water when he slammed the steel companies for raising prices. Now President Clinton is urging American companies to share success with their workers in the form of better benefits and training. He's making sure that Republican Pat Buchanan doesn't walk away with an issue likely to become more lively by election time - job security.

Announcing a conference in Washington next month to showcase companies doing well and doing right by employees and their families, he said March 23, ''We're going to talk about not how we can complain about the disruptions the global economy is bringing to America, but how we can do something about it to guarantee more economic security to the American families that are out there doing the best they can and working hard.''

Earlier, the Clinton White House drew attention to recent research examining manufacturers that follow modern work practices involving greater consideration of employees. It found that these practices boost productivity substantially and improve product quality over more ''traditional'' approaches to human-resource management.

''Employment security is a very important piece of this puzzle,'' says Casey Ichniowski, an economist at Columbia University.

For some years, though, executives in many corporations have been engaged in major downsizing operations.

Employees remember such layoffs for a decade or so, Mr. Ichniowski says. ''These are huge events in [survivors'] lives.'' That memory makes it difficult for management to win the trust necessary to introduce the ''high-performance workplace.''

To examine the impact of varying employment practices, Ichniowski and two other economists, Kathryn Shaw and Giovanna Prennushi, both of the business school at Carnegie Mellon University in Pittsburgh, studied 36 technically similar steel-finishing lines in plants across the United States.

They found that those plants that had adopted a coherent system of modern work practices increased productivity by as much as 6.7 percent over lines using such traditional techniques as narrow job definitions, strict work rules, and fixed hourly pay with close supervision. The modern practices include work teams, quality circles, flexible job assignments, careful selection of employees, sharing financial information, mechanisms to give employees a voice, training in multiple jobs, extensive reliance on incentive pay, and providing employment security.

Moreover, the average quality of the steel products increased substantially. Reject rates declined.

In one plant, management began introducing modern work practices in 1983. Downtime on the line, which hovered around 12 percent prior to these changes, declined quickly to 4 percent. The boost in operating profits as a result came to $12.9 million through 1983, the economists estimated. And that plant fell short of a category they describe as ''very cooperative and innovative.''

All these practices are meant to involve workers in the job and utilize their special knowledge. The training and job flexibility make it easier for management to provide job security should demand decline for a product. One management technique alone does little if anything for productivity. But as a package, the techniques develop a ''culture'' of high effort among employees, the authors note in a National Bureau of Economic Research paper.

The research provided empirical evidence of what much theoretical research had claimed in the past 15 years. The mills are so similar in technology that usually skewing differences mattered little when making productivity comparisons.

After a draft of the study was first published in 1994, Ichniowski was invited to meet the president. Since then, the study has won increasing attention in business through the National Association of Manufacturers and in academic circles.

Of course, in a changing world, companies aren't able to provide absolute job security. However, Ichniowski says, Japanese companies facing similar troubles have done much more to protect the economic welfare of their workers and keep their trust.

Clinton wants more companies to offer health and pension benefits, child-care assistance, education and training, ensure a safe workplace, and avoid all but the most necessary layoffs.